Mobile Payment Platform Wars: LevelUp, Paydiant, PayPal, & More

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Is 2013 the year I put all the cash under my mattress away, leave my credit card at home, and start paying for everything with my phone?

Not bloody likely. At least not for a neo-Luddite like me. Yet some proponents of mobile payments are saying this is a crucial year for the sector to start going mainstream.

“I think 2013 will be the year that a mobile payment winner will be named,” says Seth Priebatsch, the founder of Boston-based LevelUp. He doesn’t mean it’ll be the end of the story—just that a default leader will be crowned by the public. “We haven’t hit an inflection point yet,” he says, in terms of adoption. “But by the end of this year, it will be clear you can pay with your phone.”

That’s not all, of course. Many of the field’s innovators insist that the real opportunity isn’t even in the payments. “Loyalty and marketing, that’s the most interesting,” says Chris Gardner, the co-founder of Wellesley, MA-based Paydiant. “It’s not a technology debate anymore. It’s about the business model.”

Mobile payments is one of those tech sectors, like online advertising or cloud virtualization, that makes my head hurt. There are so many players coming in from different angles and at different levels of the value chain: Besides all the techies with apps and software platforms, you’ve got retailers, brands, banks, credit card companies, payment-processing firms, and a slew of loyalty and rewards programs, all vying for a piece of the pie.

That can lead to confusion—and a reluctance to buy in, among merchants and consumers alike. For the latter, it’s still pretty convenient to use a credit card or cash, even if you might save money by using your phone. And a typical merchant or retailer might think, “I’m still figuring out Twitter, please don’t talk to me about mobile payments,” says Priebatsch.

Yet times may be changing. LevelUp, for one, has been shifting its strategy in recent months. It has expanded beyond its consumer app to a platform approach, whereby third-party developers working for (or with) larger merchants can use LevelUp in the systems they build. And the startup has integrated its software with more than 20 point-of-sale companies, so that more stores and restaurants can handle LevelUp transactions directly; that helps with advertising campaigns, such as a recent one with Coca-Cola. The payoff so far? Priebatsch says February was his company’s highest-revenue month to date—up 35 percent over January.

Meanwhile, Paydiant has been progressing as well, signing up big banks and retailers as part of its “acceptance network,” Gardner says. The company’s software platform enables corporate customers to add capabilities in payments, offers, and rewards to their own apps. This “white label” approach will see more competition in the future from emerging players, including LevelUp, which Gardner views as pursuing a “land grab” strategy. “I really admire what they’ve done,” he says, “but I don’t know how the economics work long-term.”

And let’s not forget about the big boys. Google, PayPal, ISIS (from the wireless carriers), and Square are all significant players … Next Page »

Great article. I’m also excited to see which of all of these players comes out as a leader; however, I would also add that other factors like data security are going to weigh as much as marketing and loyalty. I wouldn’t rule technology out of the debate at all, especially given the nature of the data these companies are dealing with.

Question: With all the software and application solutions being put forth this year, what impact do you think hardware will have on the payments sector?

Nice story, but I think we as an industry should focus more on helping businesses understand the advantages that mCommerce can provide TODAY. The “wait and see” model does not work for businesses struggling to survive and thrive in this challenging economic and competitive environment.

Businesses can capitalize on the “first mover” advantage to get a head start capturing more market share. They will learn from experience what works best and what to avoid in terms of payment/commerce technology. That experience will help them evolve more quickly and sharpen their ability to nurture and retain existing customers as well as attract new ones at the same times since mobile commerce is much more than just payments.